Mortgages

Lost_Prophet

This a long shot but hopefully someone can help

I need to get out of renting, its dead money! I am currently paying £250 a month which I see NO return on. I have been doing it all through my student life and now I am 24, in a good job (albeit not very well paid for what I do) and have my finances in order I feel it is time to move on. The problem is, I cannot possibly save £10,000 at least within the next 2-3 years! Its taken about 6 months to save £2,700 because of salary and that's to pay an interest free credit card and my student o/d off

I need a deposit for a house. Any ideas on anything available where I pay a minimal deposit (preferably £0.00) for a mortgage? Bad times mean no more 100% mortgages but I am hoping there is something out there

I have checked out the Home Buy scheme which looks great for first time buyers BUT the bank will still require a hefty deposit :-(

WellKnownSid

Lost_Prophet wrote: »

I need to get out of renting, its dead money! I am currently paying £250 a month which I see NO return on.

It is not dead money, and it is giving you a return - it's giving you a roof over your head, without any obligation to fix the boiler, mend the electrics or patch up the hole in the roof every time it rains!

The bad news is there are no 100% or genuine no-deposit deals out there. Most "schemes" involve borrowing money from either the government or the developer (or both) on an over-priced new-build property, paying either interest or rent on the bit you don't own but with the luxury of being fully responsible for the entire property whilst you figure out how to pay back the bit you couldn't originally afford to buy and still can't because the mortgage interest alone is higher than the rent you used to pay.

The good news is that you're only paying £250 to rent (probably far less than you'd be paying a bank in interest on your mortgage which is dead money by the way) and have none of the unforeseen costs that home ownership brings with it. Furthermore, you've managed to save £2,700 in six months (albeit for other purposes), so by my reckoning it'll take you one year, ten months and seven days to save up another £10,000. By which time house prices won't have moved a great deal, mortgages will be more freely available and you'll have proven yourself to be a good candidate for one by saving up all that money.

blueberrypie

Lost_Prophet wrote: »

I need to get out of renting, its dead money! I am currently paying £250 a month which I see NO return on.

And what do you think your return on the interest incurred with a mortgage would be?

You say you pay £250 a month in rent, and it has taken you six months to save £2700. So without your rent payment, you have £250 + £450 free.

Now let's pretend for a minute that the only expense involved in owning a property is the mortgage itself - no repairs, maintenance, insurance, etc. It's a false assumption, of course, but let's just disregard those costs for a minute for the purposes of this calculation. (We're also pretending you would be in a position to get a mortgage, by the way - which you aren't, without a deposit.)

So we're pretending you'd have £700/month to spend on a mortgage payment. That equates to a mortgage of about £120k at 5% over 25 years. Let's have a look at what that £700/month consists of.

Well, in the first month, about £500 of it is interest - money you'll never see again, twice what you're paying in rent.

And assuming your first mortgage payment was May 2011, and assuming that your interest rate stayed at that 5% (low, historically), do you know when you'd be paying *less* than £250/month in interest? August 2027.



In other words, the only ways to avoid those "dead money" costs of putting a roof over your head are a) buy a property outright without a mortgage, or b) live with your parents.

I'm not saying there aren't benefits to owning your home - there are. I own mine, and prefer that to renting. Of course there are positives to renting too - if your heating dies it's someone else's expense, and if you get a job at the other end of the country you don't have the costs of selling and buying property involved in moving, and if the bottom falls out of the property market you don't find yourself stuck, unable to move because of negative equity.

But the notion that rent is somehow "dead money" and a mortgage payment isn't - well, that's nonsense.

originalmiscellany

I'd say you're in a great position where you are!
The current thinking is that house prices will go down for the next few years, so you should really aim to build up a deposit and aim to say have 10k for 2 years time as a good starting point.
250 a month is nothing at the moment - I didn't appreciate how much owning a house would cost, in terms of ongoing bills and repayment etc.

On top of buying a house you have to pay solicitors fees etc which can be a few k, and from what you've said (and I'm not judging you) you may not be in a position to afford that at the moment